INCOME TAX OFFICER, WARD23 ABOHAR, ABOHAR vs. DEEPAK ELECTRONICS, JALALABAD
Facts
The appeal concerns an assessment for AY 2017-18 against 'Deepak Electronics', a partnership firm dissolved in 2011. The business was continued by one of its partners as a sole proprietorship, Mr. Raj Krishna, under the same trade name, and he filed regular income tax returns. Cash deposits in an old bank account linked to the dissolved firm, but used by the proprietorship, led to an ex-parte assessment of Rs. 1,38,72,150/- by the AO on the non-existing partnership firm.
Held
The Tribunal acknowledged the dissolution of the partnership firm and the continuation of business as a proprietorship. However, it remitted the matter back to the AO for proper verification of the dissolution deed, audited accounts, and balance sheet of the proprietorship. If these documents are found to be correct and in order, the addition made by the AO shall be deleted, and the CIT(A)'s order deleting the addition will be sustained.
Key Issues
Validity of assessment made on a dissolved partnership firm when the business continued as a proprietorship; whether the Assessing Officer was given sufficient opportunity to verify additional evidence (dissolution deed and proprietorship accounts) before the CIT(A) deleted the addition.
Sections Cited
250, 147, 144, 144B, 5(xiv) of Faceless Appeal Scheme, 2020, 148, 142(1), 69, Rule 46A
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Income Tax Appellate Tribunal, AMRITSAR BENCH, AMRITSAR.
Before: SH. MANOJ KUMAR AGGARWAL & SH. UDAYAN DASGUPTA
IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR. BEFORE SH. MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER AND SH. UDAYAN DASGUPTA, JUDICIAL MEMBER (Physical Hearing) I.T.A. No. 660/Asr/2024 Assessment Year: 2017-18 ITO, Ward-23, Vs. Deepak Electronics, LIC 2nd Abohar. Building Floor, Gaushala Road, Abohar, (Appellant) Distt. Fazilka. [PAN:-AAEFD5598C] (Respondent) Appellant by None Respondent by Sh. Charan Dass, Sr. DR
18.12.2025 Date of Hearing Date of Pronouncement 19.12.2025
ORDER Per: Udayan Dasgupta, J.M.: This appeal is filed by the revenue against the order of ld. CIT (A), NFAC, Delhi, passed u/s 250 of the Act, 1961 vide order dated 09.10.2024 which has emanated from the order of AO, NFAC, passed u/s 147 r.w.s 144/144B of the Act, vide order dated 29.03.2022.
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During the course of hearing, there was no appearance on behalf of the assessee in spite of repeated calls neither physically nor in virtual mode. However, considering the issues involved and the materials contained in the appellate order, we proceed to dispose of the appeal, after hearing the ld. DR. 3. The grounds taken by the revenue in form 36 are as under: “1. The Ld. CIT(A) has erred in allowing the appeal of the assessee and observing that despite, raising objection during the assessment proceedings by the appellant, the AO passed the impugned assessment order in the name of non-existing entity. 2. The Ld. CIT(A) has erred while deciding the case has taken into consideration the Remand report submitted by the AO vide which the AO has intimated about only the admittance of the additional evidence i.e. the dissolution deed on 2012. No further opportunity was provided to the AO to examine the additional evidence. 3. The Ld. CIT(A) has erred in not appreciating the facts as per the clause (a) of section 5(xiv) of the Faceless Appeal Scheme, 2020, the AO should have been provided with sufficient opportunity to examine the additional evidence. 4. The Appellant craves leave to add, amend, alter, vary any or all the above grounds of appeal, 5. It is prayed that the order passed by the Ld. CIT(A) may be set aside and that of the AO may be restored.”
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Brief facts emerging from record are that the appellant is a partnership firm (PFAS) which has been dissolved by a deed of dissolution dated 15.11.2011, and the firm seized to exist, thereafter. The business has been taken over by one of the partners of the dissolved firm Mr. Raj Krishna w.e.f. 16.11.2011, under proprietorship PAN CJCPK4266P and the business continued under the same trade name of ‘Deepak Electronics’ and regular return of income has been filed since assessment year 2012-13 onwards, by Mr. Raj Krishna as proprietor of Deepak Electronics. Separate GST registration has been obtained in the name of proprietorship concern and books of accounts are being regularly maintained, all sales and purchases are duly reflected in regular books of account of the proprietorship concern and tax audit report in Form 3CB & 3CD has been duly uploaded in the individual portal (in the name of proprietor) and the bank account originally existing in the name of M/s Deepak Electronics continued under the proprietorship trade name, duly operated by individual Mr. Raj Krishna (as sole proprietor under individual PAN). 4.1 On the basis of information of cash deposited in bank a/c with SBI A/c No. xxxxx0603 held in the name of Deepak Electronics, during F.Y. 2016-17 and in absence of any return being filed in the name of the partnership firm (PAN:
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AAEFD5598C), coupled with the fact that there was no compliance to various notices issued u/s 148 followed by notices u/s 142(1) on the partnership firm, (which being already dissolved on 15.11.2011), assessment has been completed ex parte on the basis of information available in the departmental portal on a total income of Rs.1,38,72,150/- u/s 144/147 of the Act. 5. The matter was carried in appeal and in course of hearing the written submissions were submitted by the assessee stating that the fact that the assessment in the case has been completed on a non-existing entity, because the fact that the partnership firm has already been dissolved on 15.11.2011 and all supporting documentary evidences were filed before the ld. first appellate authority, stating that the business is now carried out as a sole proprietorship concern of Mr. Raj Krishna w.e.f. 16.11.2011 and the bank a/c with SBI which has formed the basis of assessment on account of cash deposit in the said account, is a bank account of the proprietorship concern and the cash deposits in the said bank a/c are duly reflected the regular books of account maintained by the proprietorship concern and are sale proceeds of the proprietorship business, for which regular returns are submitted alongwith copies of audit balance sheet, audit report and the entire transactions
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relating to the said bank account are duly reflected as business transactions of the proprietorship concern. 5.1 The documentary evidences filed by way of additional evidences before the ld. first appellate authority under rule 46A has been sent to the AO against which remand report has been obtained and on the basis of remand report the ld. first appellate authority has allowed the appeal by deleting the additions observing as follows: “7.5. During the appellate proceedings the above documents were filed by the appellant which were forwarded to the AO during the remand proceedings, but the AO did not provide any comment on the merit of the above documents. From the details and documents on record, it transpires that the AO initiated reassessment proceedings, on a non-existing entity (i.e. Deepak Electronics, a partnership firm which was dissolved in the year 2011), which was not maintaining the bank account wherein cash of Rs. Rs.1,88,72,150/- was deposited. Despite, raising objection during the assessment proceedings by the appellant the AO passed the impugned assessment order in the name of non existing entity. Therefore, I am of the considered opinion that the addition made by the AO has become Infructuous, hence the AO is directed to delete the addition of Rs. 1,38,72,150/-, made by him u/s 69 of the Income Tax Act, 1961. Accordingly, ground no. 1, 2, 3, 4 and 5 of
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the appeal are allowed. 8. In result, the appeal of the appellant is allowed.”
Now, the revenue is in appeal before the Tribunal on the ground contained in the memorandum of appeal. 7. In course of hearing, the ld. DR submitted that the ld. first appellate authority was not justified in deleting the addition without giving sufficient opportunity and time to the AO to examine the additional evidences filed by the assessee for the first time in appellate proceedings. 7.1 He further submitted that the copy of dissolution deed and copy of audit report, books of account of the individual proprietorship concern has never been produced before the AO and in absence of above documentary evidences it is not possible for the AO to come to a conclusion or to arrive at a conclusion that the concerned bank a/c and the corresponding cash deposits in the bank account are duly reflected in the books of account of the proprietorship concern and the said bank deposits are from explainable sources. 7.2 He further submitted that the ld. first appellate authority has acted arbitrarily and in total haste without allowing sufficient time to the AO for verification of the
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dissolution deed in respect of the dissolved firm and to verify the books of account of the proprietorship concern ‘Deepak Electronics’. 7.3 In other words, the ld. DR forcefully argued that the AO was not allowed sufficient opportunity to examine the dissolution deed dated 15.11.2011 and he filed a written objection on the issue, which is reproduced: “Brief submissions (in support of grounds of appeal) The CIT(A) is not justified in deleting the addition without giving opportunity to the assessing officer to examine the additional evidence filed before CIT(A) including dissolution deed assessee firm in whose hand assessment is made, copy of audit report and books of accounts of Raj Kumar prop Deepak electronics the suceesor of the firm. (ii) In the absence of above documents including returns of Income, account showing relevant bank account in the returns of income and accounts (in the case of Sh Raj Krishan claiming to be successor of assesse firm, deletion of addition is not justified. (iii) As the necessary documents have not been filed in the hand of individual neither firm, deletion of addition is not at all justified. Accordingly, CIT (A) order deserves to be set aside and that of Assessing officer deserve to be restored or Directions may be issued to make assessment in the case of individual in the case of Sh Raj Krishan ciaiming to be successor of dissolved firm in the absence of necessary documetns.
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(Charan Dass) Addl Commissioner of Income Tax (ITAT) Sr DR Amritsar.”
7.4 As such, the ld. DR prayed for an opportunity and that for remand of the case back to the files of the AO. 8. We have heard the ld. DR and consider the material available on record including the details contained in the appellate order and we find that it is a very simple issue where cash has been deposited in a bank account under A/c No. XXXXX0603 with SBI under the name and style of Deepak Electronics during F.Y. 2016-17 it is evident from the order of the ld. first appellate authority that the said Deepak Electronics was initially a partnership firm and the said partnership firm is dissolved w.e.f. 15.11.2011 vide ‘deed of dissolution’, copy of which has been filed before the ld. CIT(A) and taken on record. 8.1 Thereafter, the business under the trade name of M/s Deepak Electronics was carried out by one of the partners (of the dissolved partnership) Mr. Raj Krishna under his individual PAN CJCPK4266P as sole proprietor and regular return of income has been filed in respect of the said business as sole proprietor and the said bank a/c is also a part of the said proprietorship business and all deposits and
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withdrawals in the said bank account are duly reflected in the regular books of the proprietorship business, whose accounts are also audited in regular course and tax audit report are uploaded alongwith ITR in due course, year after year. 8.2 As such, there is no reason as to why the said cash deposits in bank account be assessed separately under the PAN of the partnership concern which is already dissolved long back in the year 2011. However, in course of hearing, the ld. DR has raised forceful objections that sufficient time has not been allowed by the ld. CIT(A) for verification of the ‘dissolution deed’ and for verification of the fact that this particular, bank account is already incorporated in the regular books of account of the proprietorship concern or not, and as such, he filed objection praying for setting aside the order. 8.3 However, considering the fact that the dissolution of the partnership firm is already evident by a copy of the dissolution deed, (that the said partnership firm has already ceased to exist w.e.f. 15.11.2011) and also considering the fact that the entire bank deposits are already considered in the regular books of account of the individual proprietor, we are of the opinion that no purpose will be served by setting aside the matter to the file of the AO for fresh assessment, but considering the written objection of the ld. DR we set aside the matter with a specific direction that the copy
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of the ‘dissolution deed’ may be produced before the AO for his examination alongwith copy of the audited accounts and balance sheet of the proprietorship concern as evidence that the said bank account is already considered and accepted as a part of the proprietorship business and we direct that if the said documentary evidences are found to be correct and in order, the addition made by the AO shall stand deleted and the order of the ld. first appellate authority will be sustained. 9. As such, the appeal is allowed for statistical purposes as per the above directions. Order pronounced on 19.12.2025 in the Open Court.
Sd/- Sd/- (MANOJ KUMAR AGGARWAL) (UDAYAN DASGUPTA) Accountant Member Judicial Member AKV Copy of the order forwarded to: (1)The Appellant (2) The Respondent (3) The CIT (4) The CIT (Appeals) (5) The DR, I.T.A.T. True Copy By order
